Quant Ratings Updated on 113 Stocks Dear Reader, Earnings season is heating up this week, with four of the seven Magnificent Seven stocks – Alphabet, Inc. (GOOGL), Meta Platforms, Inc. (META), Microsoft Corporation (MSFT) and Tesla, Inc. (TSLA) – slated to announce their latest quarterly results. (Amazon.com, Inc. (AMZN), Apple, Inc. (AAPL) and NVIDIA Corporation (NVDA) are also part of this group, but they don’t report until later.)
However, only Amazon, Alphabet, Meta Platforms, Microsoft and NVIDIA are forecast to report positive earnings growth. Apple and Tesla are forecast to announce a 0.7% and 43.5% earnings decline, respectively.
Now, I’ll admit that I think that Wall Street is being overly harsh to companies that miss expectations this earnings season. Take Netflix, Inc. (NFLX), for example. The online streaming giant reported earnings of $5.28 per share on revenue of $9.37 billion, topping analysts’ estimates for earnings of $4.52 per share and revenue of $9.28 billion.
More importantly, the company added 9.33 million new subscribers in the first quarter – substantially higher than the analyst consensus estimate of 4.84 million new subscribers. However, Netflix also announced that it would stop reporting paid membership details in the first quarter of 2025. In addition, it revealed that second-quarter revenue is expected to come in at $9.49 billion, just shy of analysts’ revenue forecasts for $9.54 billion.
As a result of the weak revenue forecast and reduced guidance, NFLX plunged more than 8% and is now trading below $600. I do expect the stock to bounce back, but this impulsive reaction tells me that Wall Streeters may continue to knee-jerk react to big companies that don’t top earnings and sales estimates and report positive forward-looking guidance. Of course, this doesn’t mean Wall Street isn’t rewarding companies that report strong earnings. It’s just that the bar is high. For example, Spotify Technology S.A. (SPOT), one of my Accelerated Profits stocks, surged more than 16% to a new 52-week intraday high today following its better-than-expected first-quarter earnings results and positive forward-looking guidance.
First-quarter revenue grew 20% year-over-year to 3.6 billion euros, while earnings reached a record 1.0 billion euros. In U.S. dollar terms, Spotify achieved first-quarter earnings of $213.9 million, or $1.05 per share and revenue of $3.95 billion. The consensus estimate called for earnings of $0.70 per share on $3.85 billion in revenue, so Spotify posted a 50% earnings surprise and a 2.6% revenue surprise.
The company noted that monthly active users increased 19% year-over-year to 615 million, which was slightly lower than Spotify’s guidance for 618 million users. Total subscribers rose 14% year-over-year to 239 million.
Looking ahead to the second quarter, Spotify expects total revenue of around $4.13 billion, which is nicely higher than current estimates for $4.01 billion.
The reality is that the best way to prosper in a more fundamentally focused environment is to invest in fundamentally superior stocks. I don’t want you invested in stocks that, due to their weak fundamentals, are likely to get hit during earnings.
So, in today’s Market 360 , I’ll share the stocks that could report disappointing earnings and be punished by Wall Street. I’ll also reveal where you can find the crème de la crème of stocks that I expect to not only post wave-after-wave of positive earnings results but also rally higher. This Week’s Ratings Changes I took a fresh look at the latest institutional buying pressure and each company’s financial health and revised my Portfolio Grader for 113 big blue chips. Of these 113 stocks, 24 were downgraded from a B-rating (Buy) to a C-rating (Hold), and 19 stocks were downgraded from a C-rating to a D-rating (Sell).
I’ve listed the first 10 stocks rated as a Sell below, but you can find the full list – including the stocks’ Fundamental and Quantitative Grades – here.
Chances are that you have at least one of these stocks in your portfolio, so you may want to give this list a skim and adjust accordingly. | AAPL | Apple Inc. | D | | BEKE | KE Holdings, Inc. Sponsored ADR Class A | D | | BRKR | Bruker Corporation | D | | CHT | Chunghwa Telecom Co., Ltd Sponsored ADR | D | | CP | Canadian Pacific Kansas City Limited | D | | CRL | Charles River Laboratories International, Inc. | D | | DGX | Quest Diagnostics Incorporated | D | | EFX | Equifax Inc. | D | | EW | Edwards Lifesciences Corporation | D | | EXAS | Exact Sciences Corporation | D | Although we have about 158 companies reporting their quarterly results this week, we’re still in the early innings of the first-quarter earnings season. So, you still have time to build your portfolio of fundamentally superior stocks to prosper in the current market environment.
Now, if you’re not sure where to look, then consider my Accelerated Profits service. Here, I focus on top growth opportunities (many of which are small- or mid-cap stocks), but we move in and out of these stocks much quicker.
I also only trade the elite 1% of all stocks on the market today. Case in point: My Accelerated Profits stocks have superior forecasted sales (31.1%) and earnings growth (276.3%), as well as a strong earnings surprise history (46.4%). In comparison, the S&P 500 is forecast to report 0.5% earnings growth and 3.5% revenue growth in the first quarter.
Since my Accelerated Profits stocks have much stronger average sales and earnings growth than the overall stock market, I expect them to emerge as market leaders.
Click here to learn more about Accelerated Profits and how to get started today.
(Already an Accelerated Profits subscriber? Click here to access the members-only website.) Sincerely, |
| Louis Navellier
Editor, Market 360
The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
Microsoft Corporation (MSFT), NVIDIA Corporation (NVDA) and Spotify Technology S.A. (SPOT) |
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